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Are Supplier Relationships Evolving with Technology for Better or Worse?

05/01/2019 By and

As the digital transformation of procurement matures, relationships with suppliers are changing — in good ways and in challenging ways.

Technology is creating efficiencies that allow better collaboration with clients, and suppliers also can on-board easier, albeit in a self-service way. Technology centralizes data and processes, yet it opens up companies to cybersecurity problems. But if you don’t embrace the latest tools, your company won’t have visibility into its supply chain to ensure that it’s ethical and sustainable, and that’s a risk that boardrooms fear and customers won’t tolerate in today’s market.

If the digital transformation isn’t managed well, supplier relationships can actually get worse, not better.

To give us a close-up view of developments in supplier relationship management, we did a Q&A with Daryl Hammett, the general manager of ConnXus, a provider whose SRM solution helps buyers and suppliers work together to be efficient, responsible and sustainable.

Spend Matters: It seems that relationships with suppliers are getting more complicated. How are businesses addressing that, and do they have enough visibility into what their suppliers are doing?

Daryl Hammett: Relationships are more complicated because of security requirements, GDPR, cybersecurity. What buyers are doing — requiring suppliers to be vetted by leveraging tools like third-party auditors, insurance requirements, penetration testing as a part of on-boarding. With all this governance, suppliers have had to pivot with SOC 2 compliance, etc. into their governance and small businesses to meet the needs of the buyers. Suppliers are adapting.

As for visibility, no, businesses don’t have enough visibility. They’re typically managing it with three or four platforms in multiple departments without one holistic view of supplier information.

Is supplier risk management being overlooked by businesses?

Yes, some businesses are overlooking risk, and some of the drivers are:

  1. No one to own setting the internal governance for risk in large and small businesses.
  2. Not a good set of protocols and controls that businesses adhere to.

But at the same time there are businesses that excel in tackling risk — forged tolerances and expectations. Supply chain and procurement teams are aligned on setting risk. And they’re constantly monitoring it through compliance and auditing at all supplier levels.

Are there benefits to mitigating  risk that businesses don’t understand?

Yes, but they don’t understand them because they do not have an overall risk governance strategy. They may see risk governance more as an obstacle to doing business versus a benefit to the overall supply chain.

You’ve talked a little about risk. What is being done about cybersecurity in the SRM space?

Here’s an example of what we’re doing: So that our buyers have better-equipped and qualified suppliers, we’ve partnered with SecurityStudio to offer FISASCORE, a self-assessment tool that analyzes your company’s security standards and provides an estimate of your security risk. We recommend using industry standards to identify vulnerabilities, control gaps, and threats to your organization’s administrative, physical and technical controls. FISASCORE is a standard way to easily communicate an organization’s security to potential buyers.

Are you seeing a shift in companies asking suppliers to do more things like self-onboarding? And how is that working out?

Yes, suppliers are being required to do more self-onboarding because it drives efficiencies for the buying organization, but it also allows suppliers to onboard at their own pace.

At the same time, one of the gaps that has been identified with self-onboarding suppliers is that supplier development falls through the cracks. Suppliers might not know where to turn if they have questions. Compliance can also fall by the wayside because there’s no main point of contact.

And direction isn’t always clear. Different-sized businesses may require different things from internal systems.

It seems like more collaboration is needed these days. Is technology doing all it can to bring stakeholders together?

Technology is only as good as the team using it. Technology can provide a great platform to maximize efficiency, but it must be properly leveraged.

If you don’t have a cross-functional team working together to collaborate on technology, you won’t get a cross-functional outcome. You need the right people on the team.

How are the buyer sides and seller sides being affected by the changes in SRM?

Buyers are being asked to do more with a lot less. Procurement has had significant reductions in staff at the same time that there’s an increase in managing and governing more compliance with suppliers. Sometimes that puts a strain on the buyers and suppliers to have a relationship. Therefore you need a platform that allows by parties to engage, comply and share information. The supplier is being asked to do self-onboarding, management. They need a good relationship platform to enable them to be efficient and effective.